Question to the Department for Work and Pensions:

To ask Her Majesty’s Government how much time they expect it will take self-employed and small businesses to complete the administration associated with the new statutory pension scheme; and whether they will recompense small businesses for their time if all their employees opt-out.

The Government is committed to helping people achieve financial security in later life and is reforming the pension system as part of its efforts to encourage a culture of saving. Automatic enrolment was introduced to enable most people in work to save for later life. It has been a great success to date with over 6.8 million eligible workers enrolled by more than 290,000 employers since it began in 2012 and it is important we recognise the contribution employers have made to this achievement.

Automatic enrolment is currently being extended to small and micro employers. While the self-employed are not eligible for automatic enrolment, they will have legal duties to enrol any eligible workers in their employ. The Government understands that these employers may find complying with automatic enrolment challenging and we are doing all we can to make automatic enrolment as straightforward as possible for this group. The Department and The Pensions Regulator (TPR) are focussed on making compliance with automatic enrolment duties as clear as possible, as well as simplifying the language regarding automatic enrolment.

As part of this work, TPR has launched an interactive “Step by Step” guide on their website. This simplified guide to meeting AE duties is designed to meet the specific needs of employers who may not have pensions experience, including those with just one or two staff. The guide includes a duties checker so that employers can easily find out what they will need to do to comply and when. Using the duties checker also means employers will receive tailored communications relevant to their circumstances.

What an employer pays and the amount of time they spend on setting up automatic enrolment will depend on various factors, including how they use business advisers, how they run their payroll and which pension scheme they choose.

From research it has conducted, TPR estimates that small employers with between one and four staff members usually spend a total of about 10 hours overall carrying out all their automatic enrolment tasks, over a 12 month period before their staging date. This research has also shown that average costs associated with outsourced payroll are less than £200 while average pension scheme set up costs are under £500.

Automatic enrolment is a legal duty for employers, just like paying the National Living Wage, tax and National Insurance. There are no plans to reimburse employers for time or costs should their employees choose to opt-out. However, less than one in ten people are choosing to opt-out which is much lower than originally estimated. We have also seen around 5% of people not eligible for automatic enrolment choosing to opt-in to their employer’s pension scheme.